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| | | | | | | | |EUROPE
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Shifting attitudes to
injunctions in patent cases
Final injunctions for successful parties in patent cases in Europe have
generally been seen as automatic. But, as Stephen Bennett, Stanislas
Roux-Vaillard and Christian Mammen explain, attitudes are evolving
1
MINUTE
READ
Despite their differing common law
and civil law systems, courts in the
UK and continental Europe have
tended to grant injunctions to successful patent owners after a trial as
a matter of course. However, this position has come under pressure
thanks to arguments advanced by
defendants, notably in cases where
the enforced patent covers only a
small part of the infringing device.
In the United States, following the
eBay decision and subsequent case
law, injunctions are no longer
viewed as automatic and in fact have
become rarer. Now, thanks to a recent Supreme Court case, the UK
courts may be heading in a similar
direction. Are automatic injunctions
now under threat? The question may
end up being addressed by the new
Unified Patent Court, and there has
already been considerable debate
about judges’ discretion to grant injunctions in this planned forum.
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M A N A G I N G I P. C O M F E B R U A R Y 2 0 1 5
U
ntil relatively recently, the question of whether
a final injunction should be granted to a patentee who has succeeded at trial has not really
troubled the courts of Europe. Although the
Continental European civil law systems and the
common law systems have approached the
issue from different starting points, the outcome has been overwhelmingly the same: injunctions are granted to successful patentees at the end of trial as a matter of course.
Things are changing and the issue has been receiving a greater
degree of interest in recent times. This has arisen because of arguments made by defendants in (predominantly) cases concerning patents for multi-function devices (mobile phones). At
the same time, the question of the grant of final injunctions has
become a hotly debated topic in preparations for the new European patent litigation system – the Unified Patent Court (UPC).
This increasing debate about the issue of final injunctions has
caused interested parties to look at the situation in the United
States, where there is considerably more development through
case law and where the approach looks different to that taken
in Europe. This article looks at where things stand in European
common law and key civil law jurisdictions, contrasts that with
the United States, and asks where things are heading in relation
to the grant of final injunctions in the UPC.
The Enforcement Directive (2004/48/EC) applies in all the
EU’s member states. It deals (among other things) with remedies for patent infringement. Of particular relevance on the
question of the grant of injunctions is Article 3 (see below 2)
and its requirement that remedies be not only effective and dissuasive but also “proportionate”. As an EU Directive, the member states are required to give it effect by enacting any national
EUROPE PATENT INJUNCTIONS
legislation necessary to bring them into line with its requirements. The member states have, in essence, taken the view that
they already comply with Article 3. English courts have referred
to the directive and the issue of proportionality in considering
the grant of injunctions (for example in HTC v Nokia [2013]
EWHC 3778 (Pat) and Vestergaard v Bestnet [2011] EWCA
Civ 424). Other courts in Europe tend not to go through this
exercise – at least in the reasons for their decisions.
Whether the practice of national courts on the grant of injunctions
for patent infringement in Europe does in fact comply with the requirement for proportionality has yet to be seriously tested. Further, the issue of injunctions in patent cases may be ripe for a referral
to the Court of Justice of the EU when (as discussed below) many
courts treat the grant of an injunction as, effectively, an automatic
right of the successful patent owner without any apparent consideration of whether an injunction is a proportionate remedy.
Current position in the UK
The starting point in English law is that injunctions are equitable
remedies. Assessment of whether an injunction should be
granted ought therefore to be an exercise in the court using its
discretion to obtain an equitable outcome. The court also has
the express ability to use its discretion to award damages in lieu
of an injunction. What has happened in practice is that case law
has severely limited that discretion such that it is challenging to
find any patent case in which a final injunction has not been
granted when the right has been found valid and infringed.
In fact, whether a final injunction should be granted is very
rarely argued at all in patent cases. This may not be surprising
in light of the hurdles set in the decision that has been the leading case on the issue since 1895 (Shelfer v City of London Electric
Lighting Company [1895] 1 Ch 287). The scarcity of case law
in relation to final injunctions in IP cases is illustrated by the
fact that the leading case cited in IP cases is Shelfer and that case
relates to issues concerning real property.
The test in Shelfer (see box), has, nonetheless, been applied in
just about all IP final injunction debates since 1895. It does appear, however, that there may be imminent changes under English law. The question of final injunctions was reviewed by the
UK Supreme Court in February 2014 in another case involving
real property (Coventry v Lawrence [2012] EWCA Civ 26).
The view from the Supreme Court in Coventry v Lawrence is that
the four-stage test in Shelfer needs to be looked at afresh. Perhaps
the most outspoken of the justices who considered this issue
was Lord Sumption when he wrote: “In my view, the decision
in Shelfer is out of date, and it is unfortunate that it has been followed so recently and so slavishly …The whole jurisprudence
in this area will need one day to be reviewed in this court.” Lord
Sumption also wrote: “The ordinary principle is that the court
does not grant an injunction in a case where there is an adequate legal remedy. In particular, it does not do so where damages would be an adequate remedy.” Having raised the issue, the
Supreme Court has not proposed an alternative to the four-step
test applied from the Shelfer case (because the question about
the grant of the final injunction was not fully argued before it).
“Harmonisation” of the position in Europe (part 1)
Article 3(1): Member States shall provide for the measures, procedures
and remedies necessary to ensure the enforcement of the intellectual property rights covered by this Directive. Those measures, procedures and remedies shall be fair and equitable and shall not be unnecessarily complicated
or costly, or entail unreasonable time-limits or unwarranted delays.
Article 3(2): Those measures, procedures and remedies shall also be effective, proportionate and dissuasive and shall be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide
for safeguards against their abuse.
By giving a general direction that a more flexible approach
should be taken, the Supreme Court is leaving it to the lower
courts to work out the detail of what any new test should be for
the grant of a final injunction. Since the Supreme Court’s decision in Coventry v Lawrence on February 26 2014 there has been
a limited amount of activity in the lower courts on the question
of final injunctions but no new test has yet emerged.
The UK, it seems, is now at a crossroads with a clear mandate
from the Supreme Court to the lower courts to look again at
the question of granting injunctions and an emphasis on the
issue of whether damages are an adequate remedy. It remains
to be seen whether the English courts will look to the US case
law for inspiration on this issue.
The approach in key European civil
law jurisdictions
European civil law jurisdictions have no legally unified approach to granting final injunctions. Nevertheless, there seems
to be a common understanding of final injunctions in these jurisdictions and France is a good example for illustrating the civil
law view on this.
The starting point in France is codified in Articles L 613-3 and
L 613-4 of the French Intellectual Property Code (IPC) which
lists all the acts which “are prohibited, absent the consent of the
patent holder”.
In a similar way, Article 28 of the TRIPs Agreement (Annex to
the WTO Marrakech Agreement signed on April 15 1994)
state that a patent confers “the right … to prevent third parties
not having the owner’s consent” from performing certain acts.
The Supreme Court is leaving it to the
lower courts to work out the detail of
what any new test should be for the
grant of a final injunction
M A N A G I N G I P. C O M F E B R U A R Y 2 0 1 5
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EUROPE PATENT INJUNCTIONS
Shelfer v City of London Electric Lighting Company [1895]
Lord Justice Smith observed that it was “a good working rule” that:
1) If the injury to the plaintiff’s legal rights is small,
2) And is one which is capable of being estimated in money,
3) And is one which can be adequately compensated by a small money
payment,
4) And the case is one in which it would be oppressive to the defendant
to grant an injunction: – then damages in substitution for an injunction
may be given
This ability of the patent holder to exclude others from performing specific acts is understood as the statutory provision
binding the court to grant final injunctive relief when asked to
do so by the patent holder. In this respect, the principle of proportionality will not systematically come into play for a court
assessing the granting of a final injunction pursuant to Article
L 613-3 or L 613-4 IPC. In practice, it is worth noting that defendants in patent cases have very rarely argued whether a final
injunction should be granted.
The French approach appears to be similar to that followed in
many civil law countries in Europe (for example, Spain, Italy, the
Netherlands and Germany) which all implemented (or considered that minimum requirements were already met nationally)
Article 11 of the Enforcement Directive ensuring that a finding
of infringement may lead to an injunction against an infringer.
At the same time, these civil law countries decided that as regards patent law there was no need to make use of the option
conferred by Article 12 of the Enforcement Directive to implement a proportionality requirement into their national laws.
This however, does not mean that a final injunction will always
be granted upon a finding of infringement as limits to the power
of the court in granting such an injunction may be found both
at the European and at the national levels.
At the European level, the Enforcement Directive itself allows
for restrictions of the court’s power to grant final injunctions
(see notably Recital 24 and Article 3 (2)). It appears that the
abuse of law principle (generally shared by civil law countries)
and the EU principle that entails eliminating distortions of competition (see Articles 101 and 102 TFEU) are such restrictions.
It is worth noting that defendants in
patent cases have very rarely argued
whether a final injunction should be
granted
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M A N A G I N G I P. C O M F E B R U A R Y 2 0 1 5
At the national level in France, it is also clear that where codified
patent law enacts limitations to patent rights, such statutory limitations are a basis for a court not to grant a final injunction. In
this respect, French patent law does allow for situations of compulsory or forced licences (even if applications of such provisions are extremely scarce) and where a third party would be
held by a court to be eligible to receive such a licence, there
would be no room for the granting of a final injunction.
Other factual situations raising the specific issue of the proportionality of a final injunction, such as situations where a patent
covers only a small fraction of the many patented technologies
in a single device but the injunction would be sought for the
whole device, could be taken into account. However, the lack
of decisions by French courts over such circumstances makes
the statutory grounds for such a discussion uncertain.
CJEU decisions on contractual defences to infringement, as
well as European and national general policy issue relating to
the enforcement of patents, may soon give more legal grounds
for civil law judges in Europe to discuss the appropriateness of
granting a final injunction in patent cases.
The US approach
The statute authorising the grant of injunctions in patent cases,
35 USC § 283, provides that the courts “may grant injunctions
in accordance with the principles of equity ...” Despite this permissive wording, for several decades before 2006, courts would
grant an injunction more or less automatically when a patent
was adjudged to be infringed (and not invalid). For example,
in Richardson v Suzuki Motor Co, Ltd, 868 F2d 1226, 1247 (Fed
Cir 1989) the Court said: “It is the general rule that an injunction will issue when infringement has been adjudged, absent
a sound reason for denying it.” In 2006, however, the US
Supreme Court ruled, in eBay v MercExchange, 547 US 388
(2006), that the granting of injunctions in patent cases must
be determined in accordance with the same traditional fourfactor test that was used by courts generally when exercising
equitable powers. Specifically, a plaintiff seeking an injunction
must show that:
1. it has suffered an irreparable injury;
2. remedies available at law, such as monetary damages, are inadequate to compensate for that injury;
3. considering the balance of hardships between the plaintiff
and the defendant, a remedy in equity is warranted; and
4. the public interest would not be disserved by a permanent
injunction.
Justice Kennedy, writing in a concurring opinion, expressed the
view that requiring application of the four-factor test would limit
the ability of non-practising entities (what have come to be referred to colloquially as patent trolls) to demand that operating
companies pay exorbitant licensing fees or risk being shut down
by a permanent injunction, without regard to the incremental
importance of the patented technology to the infringing product as a whole. The eBay decision had a major impact on patent
litigation in the United States, essentially limiting injunctions
to disputes between competitors, where the patentee offered
products in the same market as the infringing products.
EUROPE PATENT INJUNCTIONS
Less than a decade later, courts in the United States have
further narrowed the availability of injunctions, holding that
the requirement of irreparable injury also entails showing
“that a sufficiently strong causal nexus relates the alleged
harm to the alleged infringement” (Malibu Boats, LLC v
Nautique Boat Co, Inc, 997 F Supp 2d 866, 885 (ED Tenn
2014)). In other words, even between competitors, it is no
longer enough that the patentee suffers irreparable harm due
to the marketing of a product that contains the patented feature – the patentee must now prove that the harm it suffered
was because the infringing product contained the patented
feature.
This additional requirement was added in response to courts’
recognition of the complex combinations of technologies that
are often incorporated into modern products, particularly those
in the consumer electronics industry. For example, if a patent
covers feature abc, and the defendant’s product X incorporates
abc as one of dozens of product features, the nexus test requires
courts to determine whether it would be fair and equitable to
enjoin the defendant from all sales of product X, regardless of
whether it is feature abc or some other, unpatented, feature pdq,
that drives consumer demand and causes the defendant’s product to take market share from the patentee’s product. This additional requirement is still fairly new, and courts have not yet
fully addressed whether the nexus test is truly part of the eBay
four-factor test, or could readily be satisfied by issuing narrower
injunctions – for example, prohibiting the sale of “product X
“Harmonisation” of the position in Europe (part 2)
Article 11: Member States shall ensure that, where a judicial decision is
taken finding an infringement of an intellectual property right, the judicial authorities may issue against the infringer an injunction aimed at
prohibiting the continuation of the infringement.
Article 12: Member States may provide that, in appropriate cases and at
the request of the person liable to be subject to the measures provided
for in this section, the competent judicial authorities may order pecuniary compensation to be paid to the injured party instead of applying
the measures provided for in this section if that person acted unintentionally and without negligence, if execution of the measures in question would cause him/her disproportionate harm and if pecuniary
compensation to the injured party appears reasonably satisfactory.
which incorporates the abc feature” rather than merely prohibiting the sale of “product X”.
In sum, less than a decade ago, the United States followed the
same general approach as Europe, granting injunctive remedies
for patent infringement as a matter of course. However, in response to two factors, strategic litigation behaviour by some
patentees and the increasing complexity of many modern products, the United States has now taken two steps in the direction
M A N A G I N G I P. C O M F E B R U A R Y 2 0 1 5
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EUROPE PATENT INJUNCTIONS
The UPC Agreement and rules
Against this background, the wording of the
agreement for the intended UPC includes language that may be suggestive of a changed
approach in Europe. Article 63(1) provides:
“Where a decision is taken finding an infringement of a patent, the Court may grant an injunction against the infringer aimed at
prohibiting the continuation of the
infringement…”
Reading of this provision in isolation, it would
appear that the word “may” is used to indicate
that the grant of an injunction will see the new
court exercising discretion and weighing up
various competing factors. There are, however,
conflicting views about how this provision
could be read. An alternative reading is simply
that Article 63 is conferring upon the UPC the
power to grant injunctions and says nothing
about how that power should be exercised.
One of the arguments in favour of this view is
the text of Article 62 dealing with provisional
and protective measures (in this context, preliminary injunctions pending trial). Article
62(1) also provides that the court “may” grant
injunctions pending trial. However, it then
goes on in Article 62(2) to state that “the Court
shall have the discretion to weigh up the interests of the parties…”. There is, by way of
contrast, no wording in Article 63 dealing with
weighing up the interests of the parties. This
provides the basis for an argument that the
weighing up of interests only applies in the
case of preliminary injunctions.
The opposing argument is the provisions in relation to the award of damages (Article 68)
which says that the court “shall” order the payment of damages where infringement has
been found suggesting that the use of the
term “may” in Article 63 vests the courts with
discretion.
As the UPC has yet to come into effect, there
are not yet any decisions indicating what the
correct interpretation will be. However, there
has already been some early skirmishing in
relation to the settling of the draft rules of
procedure for the new court. The current version of the draft rules is version 17. The controversy about injunctions in this current
version arises from what it omits. The 16th
version of the rules carried the following
language as Rule 118.2:
Without prejudice to the general discretion
provided for in Articles 63 and 64 of the
Agreement, in appropriate cases and at the
request of the party liable to the orders and
measures provided for in paragraph 1 the
Court may order damages or compensation to be paid to the injured party instead
of applying the orders and measures if that
person acted unintentionally and without
negligence, if execution of the orders and
the measures would cause such party disproportionate harm and if damages or
compensation to the injured party appeared to the court to be reasonably
satisfactory.
of being significantly more restrictive in the granting of injunctions. American courts have implemented these changes
through the application of principles of equity, as derived from
the English common-law system. Although European courts
(including those in the United Kingdom) at present show little
inclination to follow suit, and the structure of the civil law system may make it more difficult to do so, the underlying policy
issues – patent hold-up and patent thickets – apply to some
extent in European markets as well.
The United States has now taken two
steps in the direction of being
significantly more restrictive in the
granting of injunctions.
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M A N A G I N G I P. C O M F E B R U A R Y 2 0 1 5
This language was removed in the 17th
version.
At the consultation meeting on the 17th version of the rules on November 26 2014 in
Trier, Germany, the deletion of this sub-rule
sparked considerable debate. The official explanation from the rule drafters provided a
table showing changes with explanatory remarks. In essence, the explanation was that
the original wording related to an optional
provision in the Enforcement Directive (Article 12). However, the note went on further
to give an indication of how those drafting
the rules think the new court should deal
with injunctions stating that “where the
Court finds an infringement of a patent it
will under Article 63 of the Agreement give
order [sic] of injunctive relief. Only under
very exceptional circumstances it will [sic]
use its discretion and not give such an
order”.
This seems to be statement that a US-style balancing approach is not favoured by the rules
committee. It does, however, acknowledge
that there is discretion. What no-one knows at
this stage is what value these statements of
the drafting committee will have when cases
are being litigated nor, in fact, whether this is
the last word from the committee on this provision. It is clear, however, that this issue will
be a key battleground when the court opens
for business.
An evolving story
There is a clear divergence in practice between the US and Europe (civil and common law systems) on the grant of final injunctions in patent cases. The UK may soon find itself with a
new test but the rest of Europe seems to be settled on its current
practice of injunctions being granted as of right. The story is,
however, evolving and there are likely to be further developments in the UPC debate on this issue.
Stephen
Bennett
Stanislas
Roux-Vaillard
Christian
Mammen
© Hogan Lovells 2015. The authors are partners in the firm’s
London, Paris and San Francisco offices respectively,
specialising in IP litigation